Awful April: tackling 2025’s price hikes

The value of your investments and the income you receive from them can go up and down, and you may get back less than you invest. Any examples are for illustration purposes only.

US tariffs and their market-shifting impact have dominated the headlines in April but they aren’t the only concern for everyday investors. A string of price rises in ordinary items from energy to council tax kicks in this month, putting even more pressure on already squeezed incomes. For investors, it might sound like the time to pause those regular investments but that may not be the best plan after all.

First, let’s look at what ‘Awful April’ holds for the UK’s household finances.

While some of the price hikes this month will affect everyone, some will change depending on where we live and what products and services we already use. Your phone bill might rise but, with so many tariff and handset options out there, it’s harder to say exactly what it means for you.

More generally, UK consumers can expect a 26% uptick in water rates, a 4.99% rise in council tax (higher in some areas) and a range of uplifts in household costs like broadband (+£36 per year) and phone bills (+£46), according to the Financial Times. Overall, the rises are likely to add between £600 and £1,200 to the cost of running a typical UK household, depending on usage and location.

With consumers possibly pulling in the purse strings at least until the extra burden on monthly spending becomes clear, it could mean the amount we put aside to invest each month gets reined in too. It’s understandable but the effect on long-term savings could be meaningful.

Investing £200 each month for 20 years, earning 7% compound growth (in line with the long-term return for the S&P 500 index adjusted for inflation), would deliver a total return of £101,545.83. Drop that down to £100 a month and the end result is halved too, to £50,772.92. £50 per month halves that again to £25,386.46.

The sums might seem obvious but if you still have the same financial goals i.e. topping £100,000, in our second instance you’d have to invest for around eight more years to get there. In our third example, you’d add over 17 years to your journey.

Read more:

- What assets can I invest in?

- Inflation and investing to beat it

- Compound interest: the frenemy you need to know

Now, it may be that the sudden pressure in household budgets means we have to reassess our goals, time horizon or even investment risk tolerance in light of being able to invest less. That’s a healthy use of a pause for breath but, as our figures show, if stepping back in the short-term turns into a longer pattern of investing lower amounts, the end result can really suffer.

We get it - it’s too simplistic, and frankly tone-deaf, to just say ‘keep investing’ at a time when households are coming under pressure from higher inflation than many of us are used to as well as a raft of new price rises. We also know that a lot of people are searching for ways to stay invested as much as possible, exactly because of the damaging effect stopping altogether has.

Here are a few things to keep in mind if you are trying to thread the needle, balancing higher outgoings and investments, in the near term.

1. Spring clean your subscriptions

This isn’t a trite reminder to save money on discretionary items - we all know how to do that. Rather, it’s to point out that quite a few of them like online streaming services, internet and phone bills will likely tick up at the same time. It’s a good chance to talk to providers and find out if there’s a cheaper tariff you could move to. All too often, Britons roll off their initial contract when it comes to phones, paying the default amount each month without realising anything has changed.

2. Make the most of fractional shares

If dialling down your investment amounts in the short term is the right strategy for you, don’t forget you can still buy shares in even the most expensive stocks. With fractional shares, you can invest in stocks that cost hundreds or thousands of dollars for a single share, with as little as $1. This gives you the flexibility to invest as much as you want in the companies you believe in and can also help you manage risk more conveniently. Since you’re not locked into purchasing full shares, you can diversify your portfolio with smaller amounts of money.

3. Reassess risk

As we’ve mentioned, take a moment to think about how your portfolio’s risk level might need to change if your time horizon is fixed but your ability to invest is now reduced. It may mean you now need a higher potential return from your invested money, which in turn means having another look at your asset mix. If that’s an uncomfortable proposition, you might have to make peace with investing for longer or aiming for a lower end result.

In the end, the goal of investing is to help our savings at least keep up with inflation. If they aren’t, our ability to buy the same items with our money from day to day is slowly eroding. The longer we give our money to compound, and the more we put to work, the better the chances are that we can overcome inflation’s pull on our finances. So, while April’s price rises are unlikely to be reversed any time soon, investing for the long term can give peace of mind that you are doing what you can to negate or at least slightly offset whatever price rises come next.

Important information

When investing, your capital is at risk. The value of your investments, and the income you receive from them, can go down as well as up and you may get back less than you invest. Forecasts aren’t a reliable guide to future results or returns.

Make sure to do your own research on what investments are right for you before investing or consider seeking expert financial advice. Please note that this article is meant for information and does not constitute any financial advice. This is not an offer, recommendation, inducement or invitation to buy, sell, or hold any securities, or to engage in any investment activity or strategy.